Bad Bankers Bad Fraud Deals and the Presidents Great Gatsby Problem

January 19, 2012

Richard Eskow

“Investigate the Banks!” Today a coalition of progressive groups handed in a petition with more than 360,000 signatures that demanded exactly that. It calls on the Obama administration to stop pushing a cushy fraud settlement for bankers, to pursue a fair deal for shafted homeowners, and to let criminal investigations against Wall Street crooks proceed.

Yet White House officials are still aggressively pushing the very same cushy deal on foreclosure fraud that inspired the petition. And just this week the Justice Department declined to prosecute fraudulent bankers once again as it worked to settle another bank fraud case.

Thinking about this relentless pursuit of Wall Street settlements, suddenly the last line of The Great Gatsby —the one about “boats against the current”—came to mind. Bankers are today’s Jay Gatsbys. They’re shady figures who have adopted a veneer of respectability, yet remain relentlessly, ruthlessly, and sometimes illegally self-interested.

And the very kindest way to look at Democrats who flirt with them is to compare them to Gatsby’s old flame Daisy, whose reunion with him ended in disaster.

“He had come a long way to this blue lawn and his dream must have seemed so close that he could hardly fail to grasp it.”

There was a time when Democrats could succeed by triangulating liberal imagery against neoliberal economic policy. It looked like they could have it all: The enthusiasm of their base, widespread public support, and Wall Street campaign money, all at the same time. The ’90s-era stock bubble even made it look like this was smart policy.

Those days are over. The facade has been pulled away from Wall Street’s crimes. The myth of deregulation has been exposed. Bankers have been revealed, not as “Masters of the Universe” but as ordinary people with ordinary talents but extraordinary drive and ambition—and in some cases, extraordinary greed and immorality.

Wall Street broke the economy once, and next time it could be worse. In its relentless pursuit of a mythical past where “Wall Street and Main Street rise and fall together,” the White House is endangering both the economy and its own political future.

The progressive groups behind the “Investigate the Banks” petition include Color of Change, MoveOn, Credo Action, New Bottom Line, Progressives United, and Campaign for America’s Future (where I have a fellowship). “President Obama,” the petition says. “Hold Wall Street banks accountable by fully investigating the big bank fraud that caused the housing crisis.”

“Gatsby believed in the green light, the orgiastic future that year by year recedes before us. It eluded us then, but that’s no matter–tomorrow we will run faster, stretch out our arms farther. . . . “

There was even this overhyped line, as reported by Reuters: One million homeowners may get mortgage writedowns: US. Since the proposed settlement figure is $25 million, somebody’s exaggerating here. (More than 10 million homes are underwater, and $25 million for one million homeowners comes to $25 apiece.)

“He did not know that it was already behind him, somewhere back in that vast obscurity beyond the city, where the dark fields of the republic rolled on under the night.”

A number of Attorneys General have refused to sign on to the Administration-backed deal despite intense political pressure to do so. We also learned recently that the White House is leaning on these heroes even harder, rather than backing off and letting them do their jobs – or, better yet, helping them. From Saturday’s New York Times article on California Attorney General Kamala Harris, who joined Beau Biden, in taking a strong stand:

Since taking office …. Harris has clashed with the Obama administration over one of her signature issues: foreclosures and mortgage fraud … She said the proposed settlement sought by the Obama administration asked California to “excuse conduct that has not been adequately investigated.”

The Times article includes a threat from the spokesman for Iowa Attorney General Tom Miller, who says he’ll move on without her and the others, and from a spokesman for the California Mortgage Bankers Association who threatened that California borrowers “would get nothing.”

It’s not hard to see that there’s a major disconnect forming between the White House and many of the groups it will need to rally in order to regain the White House in November. More importantly, the Administration-backed deal would let criminal activity go uninvestigated, much less unpunished, and would leave the economy vulnerable to future banking predators. (See below for more information.)

All of this suggests that the overly intimate relationship between our leaders and those who designed our failed, deregulated system – and then got rich from it – continues. So does this week’s partial settlement of currency fraud charges with Bank of New York Carnegie Mellon, where the bank agreed to stop defrauding customer while negotiations for the cash part of the settlement continue – without any apparent effort to charge the individual executives who conducted the fraud.

There’s a great war brewing on the left between Obama’s supporters and his critics. But even his staunchest supporters should be dismayed by his Administration’s insistence on pursuing unjust deals with crooked bankers. It does the President no good to pretend that these moves won’t hurt him politically, that they aren’t bad for the country, or that they’re part of some mythical ‘long game’ that the rest of us can’t possibly understand.

They’re tragic mistakes, and everyone – the Administration’s friends, as well as its critics – should insist that he stop making them.

“So we beat on, boats against the current, borne back ceaselessly into the past.”

The President’s inclusive “and/and” approach to governance can be admirable. But when it comes to criminal fraud by the nation’s bankers and the public’s resulting outrage, the situation is “either/or”: Either the law applies to everyone or it doesn’t. Either you represent wronged borrowers or you represent the bankers. America won’t humor the mad Gatsbys of Wall Street any longer, and neither should the Administration.

The days when Democrats could have it both ways are over forever. To cling to the dead triangulations of the nineties is to drown in the shifting political tides.

The president’s allies should join his critics in encouraging him to abandon the Jay Gatsbys of Wall Street to sail with, rather than against, the currents of history.
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Derek Pugh, a special assistant at the Campaign for America’s Future, focuses on economic growth and income inequality, including youth participation in the economy, the middle class, green energy, manufacturing and education.